The Audit Office is to investigate a decision by Dunedin City Council to invest in a residential development near Queenstown.
The council bought a stake in a joint venture at Luggate, near Wanaka, and bought property at Jacks Point in Queenstown, through a council-owned company, for $14 million.
The council now estimates the value of its investment has fallen by more than $6 million.
Auditor-General Lyn Provost says she began the inquiry after a request by Mayor Dave Cull,.
The council decisions were made in 2008 and 2009 before Mr Cull was elected.
